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Pilgrim's Pride (PPC) Could Be 20% Below Fair Value On Weak Earnings

Simply Wall St · 2d ago

Pilgrim's Pride earnings jolt investor focus

Pilgrim's Pride (PPC) is in the spotlight after its latest quarterly report showed weaker profitability, with second quarter net income and earnings per share far below the same period last year.

The company reported second quarter sales of US$4,626.23 million compared with US$4,757.37 million a year earlier. Net income was US$13.38 million, and basic earnings per share from continuing operations came in at US$0.06.

Over the first six months of the year, Pilgrim's Pride generated sales of US$9,158.86 million versus US$9,220.37 million a year ago. Net income for this period was US$114.8 million, with basic earnings per share from continuing operations of US$0.48.

See our latest analysis for Pilgrim's Pride.

Pilgrim's Pride shares closed at US$29.95 and the stock has seen short term share price support, with a 7 day share price return of 5.35% and 30 day share price return of 3.45%. However, momentum has faded over a longer stretch, with the 90 day share price return down 9.52% and the 1 year total shareholder return down 34.33%, compared with stronger 3 and 5 year total shareholder returns of 42.85% and 70.96% that reflect a very different longer term experience for holders.

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The latest drop in profits has pulled Pilgrim's Pride shares well below some valuation estimates, while still sitting under the average analyst target. Where does a reasonable fair value range actually fall after this move?

Most Popular Narrative: 20.4% Undervalued

The most followed narrative on Pilgrim's Pride currently points to a fair value of $37.63, compared with the last close at $29.95, which frames the latest pullback in a very different light.

The company and the broader industry are benefiting from robust growth in global chicken demand, both due to expanding middle classes in emerging markets and the growing affordability gap between chicken and other proteins like beef and pork. If investors are overestimating the durability or pace of this demand, for instance by overlooking potential substitution pressure from alternative proteins or cyclical demand slowdowns, it could result in unrealistically high revenue growth expectations.

Read the complete narrative.

This narrative rests on a tight set of earnings and margin assumptions for Pilgrim's Pride. It layers in modest top line growth, slightly thinner profitability, and a future earnings multiple that still sits below many food peers. Investors may be curious which specific revenue and earnings paths have to line up for that fair value to hold.

Result: Fair Value of $37.63 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, Pilgrim's Pride also faces risks from rising labor and compliance costs, as well as ongoing volatility in feed and other key input prices that could pressure margins.

Find out about the key risks to this Pilgrim's Pride narrative.

Next Steps

Mixed signals around Pilgrim's Pride can make the story feel unclear, so consider reviewing the underlying data promptly to form your own view with the 2 key rewards and 2 important warning signs

Looking for more investment ideas beyond Pilgrim's Pride?

If Pilgrim's Pride has you rethinking where you focus, use this moment to widen your scope and test fresh ideas with targeted stock lists built from hard numbers.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.